Spending is held in check

Spending is held in check

Greece’s primary budget deficit for the first seven months of the year was smaller than the revised projections made in July, despite the fact that the government spent over €6.3 billion in aid related to the Covid-19 pandemic.

Specifically, the primary budget deficit, which excludes payments on the country’s debt, stood at €9.077 billion, compared to the revised estimate of €9.602 billion included in the July report on the medium-term plan (2022-25).

The primary deficit is still higher than during the same period in 2020 (€7.463 billion). The medium-term plan forecasts a primary deficit for the whole of 2021 equal to 7.1% of the country’s gross domestic product (GDP), up from 6.7% in 2020.

The government managed to contain the deficit to below estimated levels, despite the fact that net revenue was €650 million short of the target, including a tax shortfall of €45 million. Also, the country had not taken into account a receipt of €644 million from the 2016 Agreement on Net Financial Assets.

The state spent over €6 billion to mitigate the economic effects of the pandemic. The heaviest expenditure was the reimbursement of prepaid taxes, which cost the state €2.726 billion. In second place was the special purpose payout to affected individuals and businesses, which came to €1.871 billion. Also, €715 million was paid to property owners as compensation for lost or frozen rents, €200 million was used to subsidize loan payments, €493 million was paid to small and very small regional enterprises hard hit by the pandemic, €104 million was provided by the Public Investment Program to subsidize the interest on loans made by small and medium-sized enterprises and the same program provided another €220 million for loan guarantees.

The total amount in pandemic aid for the first seven months of 2021 came to €6.329 billion.

A problematic part is the lower-than-expected revenues from the Public Investment Program. In July, revenue was only €90 million, compared to an expected €1.150 billion. A top Finance Ministry official said that this is partly due to a delayed payment from the EU. Also, tax revenue was €125 million short of the target, because of the extension to the deadline for filing tax returns.

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